Sensing Entrepreneurial opportunities Revision Notes

Unit - 1 : Entrepreneurial Opportunities

Topic-1Sensing Entrepreneurial opportunities

Revision Notes• Entrepreneursperceiveopportunitiesquickly,synthesizetheavailableinformationandanalyseemergingpatternsthatescapetheattentionofotherpeople.

• Entrepreneursarethemselvesresponsibleforthesuccessandfailureoftheenterprise.

• Peter F. Drucker definedentrepreneurasonewhoalwayssearchesforanopportunity.Thebasictestofasuccessfulentrepreneuristheidentificationofbusinessopportunityintheenvironmentandinitiatingstepstoproduceandsellgoodsandservicestomakethebestuseofthatopportunity.

• Entrepreneur has two basic roles:

(i) SensingOpportunity;

(ii) SpotterandProjectChampion.

• Entrepreneurship is the function which involves grabbing of an opportunity, organizing the resources andundertakingtheproductionandotheractivities.

• Abusiness opportunity is anattractiveeconomic ideawhichcouldbe implemented to createabusiness, earnprofitsandensurefurthergrowth.

• Sensing Entrepreneurial Opportunities isaprocessofperceivingtheneedsandproblemsofpeopleandsocietyandarrivingatcreativesolutions,initiallyconvertingthesesolutionsintoopportunityandthenintoanenterprise.

• Sensing Opportunities Factors:

(i) Abilitytoperceiveandpreservebasicideas; (ii) Abilitytoharnessdifferentsourcesofinformation;

(iii) VisionandCreativity.

• There are five sources to obtain ideas:

(i) Problems (ii) Change

(iii) Inventions (iv) Competition

(v) Innovation

• Elements of business opportunity:

(i) Assuredmarketscope;

(ii) Anattractiveandacceptablerateofreturnoninvestment;

(iii) Practicabilityoftheidea;

(iv) Competenceoftheentrepreneur;

(v) Potentialoffuturegrowth.

• Various stages in the Enterprise Process Diagram:

(i) Spottinganopportunitybyanalyzingtheneedsandproblemsthatexistintheenvironment.

(ii) Evaluatingtheideasreceivedfromdifferentsourcestofindacreativesolution.

(iii) Identifyingaproductorservicethroughinnovation.

(iv) Settingupaprojectandnurturingittosuccess.

2] Oswaal CBSE Chapterwise & Topicwise Revision Notes, ENTREPRENEURSHIP, Class-XII

Topic-2Scanning Environment

Revision Notes• Environment scanningiscarefulmonitoringofanorganization’sinternalandexternalenvironmentfordetectingearlysignsofopportunitiesandthreatsthatmayinfluenceitscurrentandfutureplAns.

• Theenvironmentalfactorsaffectingthemacro external environmentareasfollows:

(i) Socio Cultural Factor:Adetailedanalysisofsocio-culturalfactorswillinvolveaclosestudyofthelifestyles,beliefs,customs,conventions,practices,etc.

(ii) Political Factor: For entrepreneurship to thrive, a conducive political climate is necessary. The rules andregulationsandthe laws thatmonitorandregulate themarket forcesare framedandpromulgatedby thegovernment.

(iii) Economic Factor:Closelylinkedtothepoliticalfactoristheconsiderationofeconomicpoliciesandthegeneralhealthoftheeconomy.

(iii) Economic Factor: Closelylinkedtothepoliticalfactoristheconsiderationofeconomicpoliciesandthegeneralhealthoftheeconomy.

(iv) Legal and Financial Factors:Legalscanningoftheenvironmentdemandsanalyzingthelegalrequirementsintheestablishmentoftheproject,managementoftheprojectandalsoingettingassistancefromdifferentsources.

(v) Developmental and Institutional Support Factors: There aremany governmental andnon-governmentalagenciesthatextendsupport,guidanceandexpertisetoentrepreneurs.

• Environmental factors affecting the micro internal environment are:

(i) Suppliers

(ii) Customers

(iii) Intermediaries

(iv) Competitors

(v) GeneralPublic• The benefits of understanding the relevant environment of business are:

(i) Identificationofopportunitiestogetfirstmoveradvantage

(ii) Formulationofstrategiesandpolicies

(iii) Tappingusefulresources

(iv) Betterperformance

(v) Sensitisationofentrepreneurstocopeupwithrapidchanges

(vi) Imagebuilding• PESTELModel

(i) Political: The political environment includes taxation policy, government stability and foreign traderegulations.

(ii) Economic: The economic environment includes interest rates, inflation, business cycles, unemployment,disposableincome,energy,availabilityandcost.

(iii)Social:Thesocial/culturalenvironmentincludespopulationdemographics,socialmobility,incomedistribution,lifestylechanges,attitudestoworkandleisure,levelsofeducationandconsumerism.

(iv) Technological: It is influenced by government spending on research, new discoveries and development,governmentandindustryfocusoftechnologicaleffort,speedoftechnologicaltransferandratesofobsolescence.

(v) Ecological:Itconsidersthewaysinwhichtheorganisationcanproduceitsgoodsorserviceswithminimumenvironmentaldamage.

(vi) Legal:Itcoversareassuchastaxation,employment,law,monopoly,legislationandenvironmentalprotectionlaws.

Oswaal CBSE Chapterwise & Topicwise Revision Notes, ENTREPRENEURSHIP, Class-XII [3

Topic-3product identification and Selecting Right opportunity

Revision Notes• Aproblemisaroadblockinasituation,somethingthatsetsupaconflictandforcesyoutofindasolution.Whenanentrepreneuridentifiessucharoadblock,he/sheissaidtohaveidentifiedtheproblem.

• Onthebasisofscanningofenvironmentonecantakeupathoroughstudyofideasofdifferenttypes.Itwillalsoleadtoavarietyofsituationsoutofwhichproductsorservicescanbeselected.ThisphaseiscalledGenerationofIdeas.

• Generation of ideas refers to a conscious endeavour to collect ideas fromdifferent sources for thepurposeoffindingacreativeanswertoaneedoraproblem.Ideascanbegeneratedinthefollowingways:(i) Brainstorming (ii) Doingmarketresearch(iii)Gatheringinformationfrompublications (iv) Seekingassistancefromentrepreneurs(v) Usinghobbiestogenerateideas (vi) Talkingandlisteningtopeople(vii)Daydreamingandfantasizing

• Aftergeneratingideas,allbasicideashavetoundergoavigorousprocessofcloseexamination,evaluation,analysisandsynthesistobecomeviableopportunities.

• Idea fields canbedescribedasconvenientframesofreferenceforstreamliningtheprocessofgenerationofideas.(i) Naturalresource (ii) Existingproductsandservices(iii)Marketordemanddrivenideas (iv) Tradingrelatedideas(v) Servicesectorideas (vi) Creativeefforts(vii)Otherconsiderations

• Afteropportunityspottingandscanningof theenvironment,anentrepreneurial ideashould leadtoadefiniteproduct.

• Steps involved in identifying feasible opportunities are product identification, application and use, level ofoperation, costing, competition analysis, determining technical requirements and fixing annual turnover andprofitmargin.

• Selectionofaproductorservicewilldependupontheassessmentofmarketdemand-supplyposition.• Market assessment involves demand analysis, supply analysis, costing andpricing anddeterminingnature ofinnovationsrequired.

• Trend spotting means identification of new trends which helps entrepreneur to understand the market andproducegoodsorprovideservicesinsyncwiththemarkettrends.Waysinwhichanentrepreneurspotstrends:(i) Readtrends (ii) Talktrends(iii)Watchtrends (iv) Thinktrends

• Theentrepreneurshouldlookintovariousfactorsbeforedecidingontheopportunity.Eveniftheopportunitylooks promising, an entrepreneur should look into the environmental factors before choosing the bestopportunity.

qq

Chapter - 2 : Entrepreneurial Planning

Topic-1Forms of Business organization

Revision Notes• Fromthepointofviewofownershipandmanagement,businessenterprisesmaybebroadlyclassifiedunderthreecategories:

(i) Privatesectorenterprises(ii) Publicsectorenterprises(iii) Jointsector


• Private sector enterprises:Theenterpriseswhichareowned,controlledandmanagedbyprivateindividuals,withthemainobjectiveofearningprofitcomesunderthiscategory.

• Private individuals thus could start a venture as:

(i) Sole-Proprietorship

(ii) Partnership

(iii) JointHinduFamilybusiness

(iv) Co-operativeorganisations

(v) Company• Public sector enterprises:Whenbusinessenterprisesareowned,controlledandoperatedbypublicauthorities,withwelfareasprimaryandprofitassecondarygoals,theyarecalledaspublicsectorenterprises.

• These enterprises have the following forms of organisation:

(i) Departmentalundertakings

(ii) Publiccorporations

(iii) Governmentcompanies

(iv) Jointsectorenterprises• Joint sector is a form of partnership between the private sector and the government where management isgenerallyinthehandsofprivatesector,withenoughrepresentationonBoardofDirectorsbytheGovernmenttoo.

• Sole Proprietorship: One of the oldest, simplest and most commonly used form of business organizationwhich is owned financed, controlled andmanaged by only oneperson is called as sole proprietorship, singleentrepreneurshiporindividualproprietorship.

• Characteristics of Sole Proprietorship:

(i) Individualownership

(ii) Individualmanagementandcontrol

(iii) Individualfinancing

(iv) Noseparatelegalentity

(v) Unlimitedliability

(vi) Solebeneficiary

(vii) Easyformationandclosure

(viii) Limitedareaofoperation• Suitability of Sole Proprietorship form of business:

(i) Capitalrequirementislimited

(ii) Confidentiality/secrecyisimportant

(iii) Marketislocal

(iv) Goodsareofartisticnatureordemandscustomizedapproach

(v) Quickdecision–makingisnecessary

(vi) Sizeoftheventureissmall• Partnershipformoforganisationhasdevelopedduetotheinherentlimitationsofsoleproprietorshipi.e.

(i) Limitedcapital

(ii) Limitedmanagerialability

(iii) Limitedcontinuity• A Partnershipisanassociationoftwoormorepersonstocarryon,asco-owners,abusinessandtoshareitsprofitsandlosses.Thus,twoormorepersonsmayformapartnershipbymakingawrittenororalagreementtocarryabusinessjointlyandshareitsproceeds.

• Characteristics of Partnership:

(i) Twoormorepersons

(ii) Agreement

(iii) Profitsharing

(iv) Unlimitedliability

(v) Impliedauthority

(vi) Mutualagency


(vii) Utmostgoodfaith

(viii) Restrictionontransferofshares

(ix) Continuity• Suitability

(i) Capitalandmanagerialrequirementsarehigherascomparedtothatofsoleproprietorship,

(ii) Enterprisefallsinthecategoryofeitherbeingasmalloramediumscaleenterprise,

(iii) Directcontactwiththecustomersisessential• Incommonparlance,aCompanymeansavoluntaryassociationofapersonformedforsomecommonobjectwithcapitaldivisibleintounitsofequalvaluecalled‘shares’andwithlimitedliability.Companyisacreationoflawthatisthebirthofthisartificialhumanbeingisbylawanditcanbeputtodeathbylawonly.

• Characteristics of a Company:(i) Voluntaryassociation(ii) Artificialperson(iii) Separatelegalentity(iv) Commonseal(v) Limitedliability(vi) Transferabilityofshares(vii) Diffusionofownershipandmanagement(viii) Numberofmembers Privatecompany: Minimumrequiredmembers:2 Maximummembers:200(excludingemployees) Publiccompany: Minimumrequirement:7 Maximumnumber:Nolimit(ix) Limitationofaction(x) Wind-upisbothaspertheCompaniesActonly.It’sbornoutoflawandcanbeliquidatedonlybylaw.

• A Private Company:(i) hasaminimumoftwoandamaximumoftwohundredmembersexcludingitspastandpresentemployees.(ii) restrictstherightofitsmemberstotransfershares.(iii) prohibitsaninvitationtothepublictosubscribeforanysharesordebenturesofthecompanyoracceptany

depositsfrompersonsotherthanitsdirectors,membersorrelatives.(iv) hasaminimumpaidupcapitalofonelakhrupees(subjecttochange).(v) usestheword‘Pvt.Ltd.’attheendofitsname.

• Public Company:UnderSection2(71)oftheCompaniesAct,2013,“publiccompany”meansacompanywhich:(i) isnotaprivatecompany.(ii) hasaminimumpaid-upsharecapitaloffivelakhrupees(subjecttochange).(iii) Theminimumnumberofmembersisseven.

• Joint Hindu Family/Firm (HUFs):JointHinduFamilyorHinduUndividedFamilyBusinessisauniqueformofbusinessorganisationprevailingonlyinIndia.ItisgovernedbyHindulawandrepresentsaformwhichisowned,managedandcontrolledbythemalemembersofaJointHinduFamily.

• MeaningofHUFs:TheHUFshavebeendefinedundertheHindulaw“asafamily,whichconsistsofmalelineallydescendedfromacommonancestorandincludedtheirwivesandunmarrieddaughters.”TherelationofHUFsarisesfromthestatusnotfromlegalcontracts.CreatingHUFsarethebestpossiblewaytosavetaxes.

• Characteristics of Hindu Undivided Family(i) Creation:ItarisesbystatusoroperationofHinduLaw.(ii) Membership: Amalemember becomes amembermerely by his birth. By adoption, an outsider can be

admittedtoitsmembershipbutnototherwise.(iii) Management:The‘Karta’managestheaffairs,havingunlimitedpowers.The‘Coparceners’havenorightto

dealwithoutsidersorinspectaccounts.(iv) Liability:TheliabilityofKartaisunlimitedandthatofcoparcenersislimitedtotheextentoftheirsharein

propertywhichisjointlyheldbythefamily.


(v) Right of Accounts:ThemembersotherthanKartadonothaverighttoinspectand/orcopycontentsoftheaccountbooks.

(vi) Minorasmember:Amalefromthetimeofhisbirthbecomesthememberinthisformofenterprise.(vii) Dissolution:TheHUFcontinuestooperateforeverasdeathofmembersdoesnoteffectit.Butifallmembers

wanttomutuallydissolvethefirm,theycandoso.(viii) Implied Authority:OnlytheKartahasimpliedauthority.

• Co-operative Organisations:Aco-operativeorganisation isadifferent formofbusinessenterpriseashere, themainmotiveisnotearningprofitbutmutualhelp.Itworkswiththeprincipleofeachforallandallforeach.

• TheIndianCo-operativeSocietiesAct,1912defines,“Co-operative”inSection4as,“Societywhichhasitsobjectivesasthepromotionofeconomicinterestsofitsmembersinaccordancewithco-operativeprinciple.”

• Features:(i) Voluntaryorganisation(ii) Democraticmanagement(iii) Servicemotive(iv) Capitalandreturnthereon(v) Governmentcontrol(vi) Distributionofsurplus

Topic-2Various plans

Revision Notes• BusinessPlanisacomprehensivelywrittendowndocumentpreparedbyanentrepreneur.

• Businessplanhassub-plansrelatedto:Marketing,Finance,Operations,Human,Legal.

• ObjectiveofProduction Planistoplantheworkinamannerthateachsteptobetakenintherightplace,rightdegree,righttimeandmoreefficiently.

• Operation Plan is the soul of businessplan. It is that part of businessplanwhichdescribes list of company’soperationsinadvancethatwasacquiredbymanagementforsmoothandco-ordinatedflowofwork.

• Organisational Planisthatpartofbusinessplanthatdescribestheproposedventure’sformofownership.

• Financial Planisaprojectionofthefinancialdataaboutthepotentialinvestmentcommitmentneededforthenewventureandeconomicfeasibilityoftheenterprise.

• Inorder tobuildup loyal, efficientanddedicatedpersonnel, entrepreneursneed topayadequateandproperattentiontohuman resource planning.

• Marketingplanisaguidelineregardingthemarketingobjectives,strategiesandactivitiestobefollowedbyanyenterprise.

Know the Terms• Economic Activities: Activitiesundertaken to earnmonetarygains are called economic i.e. activitiesprimarilyconcernedwithProduction,Distributionand/orConsumptionofgoodsandservices.

• Non-Economic activities: Activities done out of love, care, affection, self-satisfaction, emotions, sympathy,patriotismetc.butnotformoney,areknownasnon-economic.

• Profession:Professionisthatoccupationinwhichoneprofessestohaveacquiredspecializedknowledge,whichisusedeitherininstructing,guidingoradvisingothers.

• Employment: An activity inwhich an individual works regularly for others and get remuneration in return,undertakingpersonalservicesaspertheagreementofemployment.

• PAN:PermanentAccountNumber(PAN)isaten-digitalphanumericnumber,issuedbytheIncomeTaxDepartment.PANenablesthedepartmenttolinkalltransactionsofthepersonwiththedepartment.


• TAN:TANor taxdeductionandcollectionaccountnumber isa10digitalphanumericnumberrequiredtobeobtainedbyallpersonswhoareresponsiblefordeductingorcollectingtax.ItiscompulsorytoquoteTANinTDS/TCSreturn(includinganye-TDS/TCSreturn),anyTDS/TCSpaymentchallanandTDS/TCScertificates.

qq

Chapter - 3 : Enterprise Marketing

Topic-1Marketing and Sales Strategy

• MarketingMixisacombinationoffourelementsviz,product,distribution,priceandpromotion.• MarketingMixreferstotheingredientsorthetoolsorthevariableswhichthemarketermixesinordertointeractwithaparticularmarket.

• VariouselementsofMarketingMixareinterdependent.• Productisanygoodorserviceofferedforsalebyanenterprise.• ComponentsofProductMixareBranding,LabellingandPackaging.• ChoiceofProductMix isaffectedbythefactors likeprofit,efficiencyoftheenterprise,bettercustomerservice,potentialtoutilizetheavailableknow-how,costreduction,etc.

• Packagingistheprocessofdesigningandproducingacontainerfortheproduct.Itpreventsthedegradationoftheproductduetoweather,climate,environmentpollution,insects,damagefromhandlingandlossduetoaccidents.

• Brandingisaprocessofgivinganame,signorasymbolreferringtotheproducttodistinguishitfromproductsofsimilarnature.

• BrandingisyetanotherimportantcomponentoftheMarketingMix.Brandingprovidesanimageandstatusfortheproduct.

• Pricingisacrucialfunctionoftheentrepreneur.Pricingisaprocessoffixingamonetaryvaluetotheproductorserviceagainsttheutilityortheexperienceoftheproductortheservice.

• Thepriceofaproductistheamountofmoneypaidbythebuyertoowntheproductorservice.• Pricemixreferstotheimportantdecisionsrelatedtofixingofpriceofacommodity.• Pricingdecisionsareinfluencedbothbyeconomicandnon-economicconsideration.Somefactorsthatinfluencepricingare:

(i) Costoftheproduction (ii) Demandfortheproduct(iii) Competitioninthemarket (iv) Governmentregulationrelatedtopricing(v) Consumerbehaviour (vi) Objectivesoftheenterprise

• SkimmingPriceMethodisamethodofsettinganextremelyhighinitialpricetorecovertheinvestmentcostattheshortestpossibletime.

• Penetrating PricingMethod is just opposite to the Skimming PricingModel. In thismodel, the price is fixedconsciouslyatalowlevelwithminimalmarginofprofit.Thisisaimedatcoveringalargeareaofthemarketsothattheproductcanpenetrateintothemassmarket.

• Achannelofdistributionortradechannelisdefinedasthepathorroutealongwhichgoodsmovefromproducersormanufacturerstoultimateconsumersorindustrialusers.Inotherwords,itisadistributionnetworkthroughwhichtheproducerputshisproductsinthemarketandpassesittotheactualusers.

• Achannelofdistributionconsistsofthreetypesofflows:

(i) Downwardflowofgoodsfromproducerstoconsumers(ii) Upwardflowofcashpaymentsforgoodsfromconsumerstoproducers(iii) Flowofmarketinginformationinbothdownwardandupwarddirection

• Typesofchannelofdistribution:

(i) Producer-customer (Direct channel-Zero level): This is the simplest and shortest channel in which nomiddlemenisinvolvedandproducersdirectlyselltheirproductstotheconsumers.Itisfastandeconomicalchannelofdistribution.


(ii) Producer-Retailer-Customer (Indirect-One level):Thischannelofdistributioninvolvesonlyonemiddlemencalled‘retailer’.Underit,theproducersellshis/herproducttobigretailers(orretailerswhobuygoodsinlargequantities)whointurnselltotheultimateconsumers.

(iii) Producer-Wholesaler-Retailer-Customer (Two levels):Thisisthemostcommonandtraditionalchannelofdistribution.Underit,twomiddlemeni.e.wholesalersandretailersareinvolved.Here,theproducersellshisproducttowholesalers,whointurnsellittoretailers.

(iv) Producer-Agent-Wholesaler-Retailer-Customer (Three levels):This is the longestchannelofdistributioninwhichthreemiddlemenareinvolved.Thisisusedwhentheproducerwantstobefullyrelievedoftheproblemofdistributionandthushandsoverhis/herentireoutputtothesellingagents.

• Asalesstrategyconsistsofaplanthatpositionsacompany’sbrandorproducttogainacompetitiveadvantage.• Aneffectivesalesstrategyrequireslookingatlong-termsalesgoalsandanalyzingthebusinesssalescycle,aswellasmeetingwithsalespeopleabouttheirpersonalcareergoals.

• Twobasictypesofsalesstrategy:(i)Directsalesstrategy,(ii)Indirectsalesstrategy.• Components:(i)Productplacement,(ii)Promotion,(iii)Testimonials,(iv)Core-sellingstrategies.• Promotion includes advertisement, creating awareness about the product among the consumers, educatingcustomersabouttheuseoftheproduct,etc.

Topic-2promotion Strategy

Revision Notes• Promotion is themethod to spread thewordabout theproductor service to customers, stakeholders and thebroaderpublic.

• Therearevariousapproachesacompanycanusetopromoteitsproductsviz.,

(i) Above-the-line (ii) Below-the-line (iii) Through-the-line• Above-the-linepromotionsusemassmediamethods.This typeofpromotionfocusesonadvertisingtoa largeaudience.Itincludesconventionalmedialikeprint,online,televisionandcinemaadvertising.

• Below-the-linemethodsareveryspecific,memorableactivitiesfocusedontargetedgroupsofconsumers.Theyareunderthecontroloftheorganisation.

• Through-the-line refers toanadvertisingstrategyinvolvingbothaboveandbelow-the linecommunications inwhichoneformofadvertisingpointsthetargettoanotherformofadvertisingtherebycrossingthe“line”.

• PromotionMixisacombinationofcommunicationtoolstoachievedesiredcommunicationeffectsaimingtoinformandpersuadecustomersaboutthemeritsofaproductwithintention.

• TheelementsinvolvedinthePromotionalMixare:

(i) Advertising (ii) SalesPromotion

(iii) PersonalSelling (iv) PublicRelations• Advertisingreferstoapaidformofnon-personalcommunication,presentationorpromotionofideasaboutgoodsorservices.Itisaimedatprovidinginformation,developingattitudesandinducingactionbeneficialtosponsors.

• Theprimarygoalofadvertisingistoimprovethelikelihoodofthecustomerstobuytheadvertisedproduct,itcanbethroughTelevision,Webadvertising,Newspapers,Magazines,Radio,etc.

• Advertising aims to:(i) Makebusinessandproductnamefamiliartothepublic.(ii) Creategoodwillandbuildafavourableimage.(iii) Educateandinformthepublic.(iv) Offerspecificproductsorservices.

(v) Attractcustomerstofindoutmoreaboutyourproductorservice.• Therules:

(i) Aim (ii) Target(iii) Media (iv) Competitors


• Commonlyusedmedia:

(i) Stationary:Stationary,whichincludesletterheads,envelopesandbusinesscards,isameansbywhichthebusinessimageornameidentificationisprojected.

(ii) Window display or office front:Theexternalpresentationofthebusinessofficeorshopisoneoftheprincipalwaysofestablishingthebusinessimage.

(iii) Press advertising:Thisisacommonlyusedformofgeneraladvertisingandincludesadvertisinginallpresssuchasnewspapers,magazinesandjournals.

(iv) Radio:Radioisconsideredbymanyadvertisersasanidealmediumduetoitsabilitytoreachspecifictargetgroupsforexampleteenagers,racingfollowersorgrocerybuyers.

(v) Television:Televisionisapowerfuladvertisingmediumbecauseitcreatesimpactthroughsight,soundandmovement.

(vi) Direct mail:Thisisabroadcategorycoveringdirectcommunicationwiththeconsumerthroughemail,postorfax.Itcanincludenewsletters,cataloguesandletters.

(vii) Outdoor: This is any type of advertising which is done outdoors, including static advertising such asbillboards,backsofstreetbenchesandbussheltersormobileadvertisingdisplayedonbuses,trains,taxisortowedsignage.

(viii) Ambient:Referstoanyformofadvertisingthatoccursinanon-standardmediumoutsidethehome,andusuallywhereyourconsumersarelikelytobe.

(ix) Cinema:WecanpurchasecinemaadvertisingbyindividualcinemasorscreensforaSetamountofscreeningsor“runs”.

(x) Point of sale:Advertisingatthepointwheretheconsumermakesapurchasedecision,e.g.,floorstickers,in-storedigitaladvertising,shoppingtrolleysignage,shelforcounterpostersorplayingdocumentariesaboutyourproductinstore.

(xi) Online: The options for online advertising continue to grow rapidly. They include advertising on yourwebsite,advertisingonotherwebsites,creatinglinkstoyourwebsitefromotherwebsites,publishingblogs,offeringonlineproductgames,socialnetworksandforums.

(xii) Directory listings:Manyconsumersusebusinessdirectoriestofindasupplier.Directoriesincludetheyelloworwhitepages,uniondirectories,tradedirectoriesorlocalbusinessdirectories.

• Sales promotionrelatestoshort-termincentivesoractivitiesthatencouragethepurchaseorsaleofaproductorservice.

• The objectives of the Sales Promotion are :

(i) Tointroduceanewproductintothemarket.

(ii) TobuildabridgebetweentheEntrepreneurandtheCustomer.• Themajorsalespromotionactivities:

(A) ConSUMErProMoTionS

(i) Pointofpurchasedisplaymaterial

(ii) In-storedemonstrations,samplingsandcelebrityappearances

(iii) Competitions,coupons,sweepstakesandgames

(iv) On-packoffers,multi-packsandbonuses

(v) Loyaltyrewardprogrammes

(B) BUSinESSProMoTionS

(i) Seminarsandworkshops

(ii) Conferencepresentations

(iii) Tradeshowdisplays

(iv) Telemarketinganddirectmailcampaigns

(v) Newsletters

(vi) Eventsponsorship

(vii) Capabilitydocuments


(C) TrAdEProMoTionS

(i) Rewardincentiveslinkedtopurchasesorsales

(ii) Resellerstaffincentives

(iii) Competitions

(iv) Corporateentertainment

(v) Bonusstock

(d) SALESForCEProMoTionS

(i) Commissions

(ii) Salescompetitionswithprizesorawards• Personal Selling is also known as Salesmanship. The American Marketing Association defines the term,‘Salesmanship’asthe‘PersonalorImpersonal’processofassistingand/orpersuadingaprospectivecustomertobuyacommodityorserviceandtoactfavourableuponanideathathasacommercialsignificancetotheseller.

• ThefeaturesofPersonalSellingorSalesmanshipareasfollows:

(i) Itinvolvespersonalandindividualcommunication.

(ii) Itreliesmostlyonverbalmessages.

(iii) Itmakesanhonestefforttoinducethecustomerstobuytheproducts.

(iv) Itisflexible.• Public relationsisthedeliberate,plannedandsustainedefforttoestablishandmaintainmutualunderstandingbetweenanorganization(orindividual)andits(ortheir)public.

• The main public relations tools:

(i) Newscreationanddistribution(mediareleases)

(ii) Specialeventssuchasnewsconferences,grandopeningsandproductlaunches

(iii) Speechesandpresentations

(iv) Educationalprograms

(v) Annualreports,brochures,newsletters,magazinesandAudio–visualpresentations

(vi) Communityactivitiesandsponsorships

Know the Terms• Trade mark:Abrandorpartofabrandthatisgivenlegalprotectionagainstitsusebyotherfirmsiscalledatrademark.Thus,atrademarkisessentiallyalegalterm,protectingtheseller’sexclusiverighttousethebrandname/mark.

• Brand mark:Abrandmarkisthatpartofabrandwhichcanberecognizedbutcannotbevocalizedi.e.isnon-utterable.Itappearsintheformofasymbol,designordistinctcolourscheme.

• Labelling:Itisthedisplayofinformationaboutaproductonitscontainer,packaging,ortheproductitself.• Patents:Itgrantsaninventortherighttoexcludeothersfrommaking,using,selling,offeringtosell,andimportinganinventionforalimitedperiodoftime,inexchangeforthepublicdisclosureoftheinvention.

• Copyright:Itgivesthecreatoroforiginalworkexclusiverightstoit,usuallyforalimitedtime.Itmeansapplytoawiderangeofcreative,intellectualorartisticformsorwork.Forexample,musicalcomposition,literaryworksuchaspoems,playsetc.

• Industrial design:Itprotectsthevisualdesignofobjectsthatarenotpurelyutilitarian.Itcanbeatwoorthreedimensionalpatternusedtoproduceaproduct,industrialcommodityorhandicraft.

• Trade Secret:Any confidential business informationwhichprovides anenterprise a competitive edgemaybeconsideredatradesecret.Forexample,Coca-Colaformula.

• AIDA: (i) Attention:Itcatchestheeyeorearandstandsoutamidtheclutterofcompetingadvertisements.(ii) Interest:Itarousesinterestanddeliverssufficientimpactinthemessageoroffering.(iii) Desire:Itcreatesadesiretolearnmoreorcraveownership.(iv) Action:Itspursanactionwhichleadstoachievementofthead’soriginalobjective–i.e.itpromptspotential

customerstopurchaseoruseyourproductorservice.


Chapter - 4 : Enterprise Growth Strategies

Topic-1Franchising

Revision Notes• Expansion of a concern may be:

(i) Internalexpansion (ii) Externalexpansion• Internal expansion: Internal expansion results from the gradual increase in the activities of the concern. Theconcernmayexpanditspresentproductioncapacitybyaddingmoremachinesorbyreplacingoldmachineswiththenewmachineswithhigherproductivecapacity.

• External expansion or Business combination:Externalexpansionrefers tobusinesscombinationwhere twoormoreconcernscombineandexpandtheirbusinessactivities. In theprocessofcombination, twoormoreunitsengageinsimilarbusinessorrelatedprocessorstages.

• Mainformsofexternalexpansion:(i) Franchising (ii) MergersandAcquisitions

• Franchisingisanagreementwherebyamanufacturerorsoledistributorofatrademarkedproductorservicegivesexclusiverightsoflocaldistributiontoindependentretailersinreturnfortheirpaymentofroyaltiestostandardizedoperatingprocedures.

• Afranchiseagreementisthelegaldocumentthatbindsthefranchisorandthefranchiseetogether.• The main ingredients of a franchise agreement:

(i) ContractExplanation (ii) OperationsManual(iii) ProprietaryStatements (iv) OngoingSiteMaintenance

• Types of franchising: (i) Productfranchisebusinessopportunity (ii) Manufacturingfranchiseopportunity

(iii) Businessfranchiseopportunityventures (iv) Businessformatfranchiseopportunity• Advantage to the franchisee :

(i) Productacceptance (ii) Managementexpertise

(iii)Capitalrequirements (iv) KnowledgeoftheMarket

(v) Operatingandstructuralcontrols• Disadvantages to the franchisee :

(i) Rightandtheonlywayofdoingthings (ii) Continuingcostimplication

(iii) Riskoffranchisorgettingbought (iv) Inabilitytoprovideservices

Topic-2Mergers and Acquisitions

Revision Notes• MergersandAcquisitions(M&A)isapotentialstrategyforensuringtheacceleratedgrowthofabusiness.• Mergerisacombinationoftwocompaniesintoonelargercompany.• Forms of merger:(i)Amalgamation,(ii)Absorption.• Types of mergers:(i)Conglomerate,(ii)Horizontal,(iii) MarketExtension,(iv) Vertical,(v)ProductExtension.• Conglomerate:Amergerbetweenfirmsthatareinvolvedintotallyunrelatedbusinessactivities.• Horizontal merger:Amergeroccurringbetweencompaniesinthesameindustry.Horizontalmergerisabusinessconsolidationthatoccursbetweenfirmswhichoperateinthesamespace,oftenascompetitorsofferingthesamegoodsorservice.


• Marketextensionmergers:Amarketextensionmergertakesplacebetweentwocompaniesthatdealinthesameproducts but in separatemarkets. Themainpurpose of themarket extensionmerger is tomake sure that themergingcompaniescangetaccesstoabiggermarketandthatensuresabiggerclientbase.

• Product extension mergers:Aproductextensionmergertakesplacebetweentwobusinessorganizationsthatdealinproductsthatarerelatedtoeachotherandoperateinthesamemarket.TheproductextensionmergerallowsthemergingcompaniestogrouptogethertheirproductsandgetaccesstoabiggerSETofconsumers.Thisensuresthattheyearnhigherprofits.

• Vertical merger:Amergerbetweentwocompaniesproducingdifferentgoodsorservicesforonespecificfinishedproduct.Averticalmergeroccurswhentwoormorefirms,operatingatdifferentlevelswithinanindustry’ssupplychain,mergeoperations.

• Acquisitionmeansacompanybuyingmost,ifnotall,ofthetargetcompany’sownershipstakesinordertoassumecontrolofthetargetfirm.

• TypesofAcquisition:(i)Friendly,(ii)Reverse,(iii)Backflip,(iv)Hostile.(i) Friendlyacquisition:Boththecompaniesapproveoftheacquisitionunderfriendlyterms.Thereisnoforceful

acquisitionandtheentireprocessiscordial.(ii) reverseacquisition:Aprivatecompanytakesoverapubliccompany.(iii) Backflipacquisition:Averyrarecaseofacquisitioninwhichthepurchasingcompanybecomesasubsidiary

ofthepurchasedcompany.(iv) Hostileacquisition:Heretheentireprocessisdonebyforce.Thesmallercompanyiseitherdriventosucha

conditionthatithasnooptionbuttosayyestotheacquisitiontosaveitsskinorthebiggercompanyjustbuysoffallitsshare,therebyestablishingmajorityandhenceinitiatingtheacquisition.

• reasonsforMergersandAcquisitions:

(i) Synergy (ii) Acquiringnewtechnology

(iii) Improvedprofitability (iv) Acquiringacompetency

(v) Entryintonewmarkets (vi) Accesstofunds

(vii) Taxbenefits

Know The Terms• Franchisor:Thepersonofferingthefranchiseisknownasthefranchisor.• Franchisee:Thefranchiseeisthepersonwhopurchasesthefranchiseandisgiventheopportunitytoenteranewbusinesswithabetterchancetosuccessthanifheorsheweretostartanewbusinessfromscratch.

• Amalgamation:Twoentitiescombinetogetherandformanewentity,extinguishingboththeexistingentities.• Absorption:oneentitygetsabsorbedintoanother.Thelatterdoesnotloseitsentity.• Pure conglomerate mergers:Pureconglomeratemergersinvolvefirmswithnothingincommon.• Mixedconglomeratemergers:Mixedconglomeratemergersinvolvefirmsthatarelookingforproductextensionsormarketextensions.

Chapter - 5 : Business Arithmetic

Topic-1Unit of Sale, Unit cost and Break Even Analysis

Revision Notes• Unitofsaleisrequiredtounderstandtheeconomiesofabusinessinaneasyandstandardizedmanner.

• UnitPricepercustomer=Total Billed Amount

Number of customers


• Unitcostperproduct=Total Sale

Number of Unit Sold

• Grossprofit=Sellingpriceperunit–Costpriceperunit.

• Break-EvenPointisthelevelofsalesthatequalsallexpensesrequiredforgeneratingthesales.Itisneitherlossnorprofit.

• AtBreak-EvenLevel:Totalrevenue=Totalexpenses

• Breakevenanalysishelpsinsettingprofitgoalsandsalestargets.

• SalesMixistheproportioninwhichtwoormoreproductsaresold.

• Thecalculationmethodforbreak-evenpointofsalesmixisbasedonthecontributionapproachmethod.

Topic-2Working capital

Revision Notes• Moneyneededtofundthenormal,day-to-dayoperationsofabusinessisknownasworkingcapital.• Operatingcycleorcashconversioncycle is the lengthof timebetweena firm’spurchaseof inventoryandthereceiptofcashfromaccountsreceivable.

• Grossworkingcapital is thesumtotalofall currentassetsof thebusiness.These includecash, inventory (rawmaterials,workinprocess,finishedgoods,sparesetc.)andaccountsreceivable(ortradedebtors).

• Networkingcapitalistheexcessofcurrentassetsovercurrentliabilities.

Topic-3inventory control, Economic order Quantity (EoQ), Return on investment (Roi) and Return on Equity (RoE)

Revision Notes• Inventoryisrequireddirectlyorindirectlytomakeasale(oftheendproduct)andforalsogettingthefinalproduct.

• Inventorycontrolsystemisdesignedtobringaboutexpectedcontrolovertheinventoryanditsutilization.

• Economicorderquantityistheorderquantityofinventorythatminimizesthetotalcostofinventorymanagement.

• Re-orderpointisthelevelofinventorywhenanordershouldbemadewithsupplierstobringtheinventoryupbytheeconomicorderquantity.

• Carryingcostreferstothetotalcostofholdinginventories.Thisincludeswarehousingcostsuchasrent,utilitiesandsalaries,financialcostsuchasopportunitycostandinventorycostrelatedtoperishability,pilferage,shrinkageandinsurance.

• Todeterminehowmuchtoorder,E.O.Q.isused.

• ROIistheratiothatreflectstheoverallprofitabilityofbusiness.

• Investmentmeansthelongtermfundsdeployedinbusiness.

Know the Terms• EBITDA:TheacronymEBITDAstandsforearningsbeforeinterest,taxes,depreciationandamortization.

• Pareto principle:TheParetoprinciple(alsoknownasthe80–20rule,thelawofthevitalfew,andtheprincipleoffactorsparsely)statesthat,formanyevents,roughly80%oftheeffectscomefrom20%ofthecauses.


• Carrying cost:Inmarketing,carryingcostreferstothetotalcostofholdinginventory.Thisincludeswarehousingcosts suchas rent,utilitiesandsalaries, financial costs suchasopportunitycost,and inventorycosts related toperishability,pilferage,shrinkageandinsurance.

• SKU:SKUistheverybasicunitfordatacollectionandfurthermanipulationforderivingmeaningfulstatisticsanddecisionmaking.BarCodesandRFID(RadioFrequencyIdentification)tagsareusedintrackingetc.usingSKU.

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Chapter - 6 : Resource Mobilization

Topic-1primary Market

Revision Notes• ‘Production’,‘Marketing’,and‘Financing’,deemedasthemostimportantfactorsforanybusinesssurvival,rates“Financing”asthefirstbecausenothingcanbedonewithoutmoney.Thus,themostcriticalelementforsuccessinbusinessis‘Finance’.

• The role of transferring financial resources from the surplusunits to thedeficit units iswhat is referred to as“FinancialIntermediation”.Capitalmarketsplayaveryvitalroleofafinancialintermediary.

• Acapitalmarketmaybedefinedasanorganizedmechanismmeantforeffectiveandsmoothtransferofmoney,capitalorfinancialresourcesfromtheinvestorstotheentrepreneurs.

• TypesofmarketsavailableunderCapitalMarket:(i)PrimaryMarket,(ii)SecondaryMarket.• ThemarketplacefornewsharesiscalledPrimaryMarket.• TheplacewhereformerlyissuedsecuritiesaretradedisknownasSecondaryMarket.• Methodsofflotationofnewissues:Anentrepreneurcanraisetherequiredcapitalintheprimarymarketbythefollowingmethods:

(i) Publicissue (ii) Rightsissue(iii) Privateplacement (iv)Offertotheemployees

Topic-2Angel investors and Venture capital Funds

Revision Notes• Businessangelorinformalinvestororanangelinvestor,isanaffluentindividualwhoprovidescapitalforabusinessstart-upandearlystagecompanieshavingahigh-risk,high-returnmatrixusuallyinexchangeforconvertibledebtorownershipequity.

• Venturecapitalisatypeofprivateequitycapitalprovidedasseedfundingtoearly-stage,highpotential,highrisk,growthupcompanies/entrepreneurswholackthenecessaryexperienceandfundstogiveshapetotheirideas.

• Venturecapitalisanequitybasedinvestmentinagrowth-orientedsmalltomediumbusinesstoenabletheinvestorstoaccomplishobjectives,inreturnforminorityshareholdinginthebusinessortheirrevocablerighttoacquire.

• Aventurecapitalistprovidesguidancetocompanyandisabusinesspartnersharingbothriskandreward.• Features of venture capital:

(a) Itisbasicallyequityfinanceinrelativelynewcompanies.(b) Itislong-terminvestmentingrowth-orientedsmallormediumfirms.(c) Venturecapitalistnotonlyprovidecapitalbutalsobusinessskillstoinvesteefirms.(d) Itinvolveshighrisk-returnspectrum.(e) Itisasubsetofprivateequity.(f) Theventurecapitalinstitutionshaveacontinuousinvolvementinthebusinessaftermakingtheinvestment.(g) Suchinstitutionsdisinvesttheholdingseithertothepromotersorinthemarket.


Know the Terms• Volume :Volumeisnothingbutquantityofshares.

• Share trading :BuyingandsellingofsharesiscalledSharestrading.

• Transaction :OnecycleofbuyingandsellingofstocksiscalledOneTransaction.

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Documents

Sensing Entrepreneurial opportunities Revision Notes